Why Set Impossible Goals for 2021? [The Ultimate New Year’s Savings Hack]

In the 1980s, self-driving cars and smartphones without antennas were only things you’d see in movies — unimaginable futuristic goals. Now, these “impossible” inventions are part of people’s everyday lives. These innovative ideas were thought to be outlandish years ago until creators like Elon Musk and IBM’s team put their impossible goals to the test.

Impossible goals are things you want to achieve that seem out of the ordinary — ones that feel as if you may never reach them, even in your wildest dreams. These goals could be turning your dream side hustle into a full-time job or building your savings from zero in the next year to buy your dream home.

While the end result seems unreachable, a mix of motivation, determination, and hard work can get you further than you think. To see the strategic process of setting and achieving your biggest life goals, keep reading our jump to our infographic below.

What’s an Impossible Goal?

An impossible goal is a goal you think you could never achieve. Becoming a millionaire, buying your dream home, or starting a business may be your life goal, but one too big that you never set out to achieve. Instead, you may stick to your current routine and believe you should live life in the comfort zone.

Becoming a millionaire usually requires investing time, confidence, and a lot of hard work — things that may challenge you. But when you think about the highest achievers, most of them had to put in the effort and believe in themselves when nobody else did.

Flashback to 1995 when nobody believed in the “internet store” that came to be Amazon. While that was considered impossible years ago, Amazon’s now made over $280 billion dollars.

In other words, when you make your impossible goals a priority, you may be pleasantly surprised by your progress. We share how to set hard financial goals, why you should set them, and how these goals could transform your financial portfolio this year.

Impossible Goals Set by the Rich and Famous

4 Reasons to Reach for the “Impossible”

Impossible goals challenge you to shift your way of thinking — getting comfortable out of the safety zone. They help fine-tune your focus for daunting tasks you’re willing to put in the time and work for. Whether you’re looking to become a millionaire, buy your dream house, or pay down your debts, here’s why you should set goals for things you think you could never achieve.

1. You May Be Pleasantly Surprised

Everything seems impossible until you do it. When you’re in elementary school, maybe you thought getting a four-year college degree would be out of reach. Regardless, you put in the time and hard work to become a college grad years later. The same goes for your potential goal to write a book. You may think it’s hopeless to write a few hundred pages in the next year, but you may find it attainable once you hit the halfway point.

2. You Check Off Micro-Goals Along the Way

It’s hard to set your goals too low when you’re trying to reach for the stars. In the past, you may have set small goals like being more mindful with your money. While mindfulness practices are extremely beneficial for your budget, you may need more of a push to save for your dream home. By setting impossible goals, you may find it easier to reach your savings goal this year. You may have no idea how to do it, but your goal is to figure it out. Side hustles, a new job, or starting a business are all potential starting points.

3. It May Not Be as Hard as You Think

It can be uncomfortable to try something for the first time, so to avoid the doubts of reaching your goals, create a strategic plan. Download and print out our printable to breakdown each impossible goal. Start with your big goals and break them down into mini-goals. For example, if you want to start an online ecommerce store, researching the perfect website platform is a good starting point.

4. What Do You Have to Lose?

If you already live a comfortable life, you may only have experiences to gain and nothing to lose. When embarking on this journey, check in with yourself every month. Note all the lessons you learned and how far you’ve come. You most likely will face failures, but you’ll be failing forward rather than backwards. Your first ecommerce product launch may not have gone smoothly, but you may know how to improve for the next time around.

Impossible Goals Roadmap

Impossible Goals Download Button

How To Set Impossible Budgeting Goals in 6 Steps

If your impossible goal is related to finances, your mindfulness, time, and dedication will be required to put you on a path towards your dream life. To get started, follow our step-by-step guide below.

Step 1: Map Out Your Dream Lifestyle

  • Get out a journal and map out your dream life. Some starter questions may be:
  • Do you want to afford that house you’ve always dreamt about?
  • Do you want to have a certain amount of money in your savings?
  • Are you hoping to turn your side hustle into a full-time job?
  • What do you find yourself daydreaming about?

Track all these daydreams in a notebook and curate the perfect action plan to achieve each goal.

Step 2: Outline Micro-goals to Reach Your Financial Goals

Now, list out mini-goals to achieve your desires. Start with the big “unachievable” goal and break it down into medium and small goals, then assign each mini-goal a due date. For example, saving $10,000 this year may take more than your current monthly earnings. To achieve this, you may create passive income streams. If that side hustle is to start a money-making blog, you may need to research steps to successfully launch your website.

Step 3: Believe and Act Like Your Future Self

Think of yourself as the future self you want to be. You may picture yourself with a certain home, financial portfolio, and lifestyle, but your current actions may not reflect your future self. Your future self may invest, but your current self is too intimidated to start. To act like your future self, consider doing the research and finding low-risk investments that suit you and your budget.

Step 4: If You Fail, Learn from Your Mistakes

When working towards your dream life, you may hit roadblocks and experience failures. As Oprah explains it, “there is no such thing as failure. Failure is just life trying to move us in another direction.” While failure may happen, you’re able to learn from it and pivot. Every mistake you make, analyze it in your journal. Note what worked, what didn’t, and what you want to do better tomorrow to surpass this roadblock.

Step 5: Track Your Results Consistently

Host monthly meetings with yourself to see how far you’ve come. Consider creating a goal tracking system that suits you best. That may include checking your budgeting goals off in our app month after month. Find a system that works for you and note your growth at the end of each month. If you’re putting in the time and hard work, you’ll get closer to your goals in no time.

Step 6: Be Patient With Your Budget Goals

Throughout this journey, practice patience. Setting goals may be exciting and motivating, but when you’re faced with failures, you may feel hints of disappointment. To avoid a failure slump, be patient and open to learn from your mistakes. If you didn’t make what you wanted from your side hustle the first year, you’re that much closer than you were last year.

Why set your sights on hard goals? Everything feels out of reach until you do it. All it takes is motivation and determination to achieve the impossible. To boost your lifestyle, budget, and drive this New Year, consider setting goals that feel out of reach. Keep reading to see why these goals may be perfect for you. Why Set Impossible Goals for 2021? [The Ultimate New Year’s Savings Hack] appeared first on MintLife Blog.

Source: mint.intuit.com

The Shame of Debt

Money doesn’t make you happy. That’s how the saying goes, and you can’t deny that there’s some truth to it. However, while having lots of money won’t make you happy, having very little is more likely to make you stressed and depressed. 

The less you have, the more likely you are to stress over the smallest of things, and if debt is forcing that poverty on you, hanging a dark cloud of uncertainty over your head, that stress and that depression will increase.

Psychological Cost of Debt

Debt has a massive psychological cost and a lot of that boils down to shame. Debt stress and debt shame are more common than ever in the United States, as debtors seek to hide their troubles from their families and loved ones. There is an unmistakable link between debt and an increased suicide risk.

A student conducted several years ago looked at the finances of people who had committed suicide and found they were significantly more likely to have massive debts (student loan debt, credit card debt). Similar studies have been conducted on mental health, noting that people are more likely to suffer from debilitating depression, stress, and anxiety when they have problems with debt.

And it’s easy to see why. Not only do many debtors choose to keep their problems to themselves, feeling an immense shame that stops them from telling even their closest friends and family, but debt can also lead to anxieties about debt collectors, foreclosures, repossessions, bankruptcy, and more. 

How to Overcome the Shame of Debt

To improve your mental health, you need to fight debt stress and shame. That’s easier said than done, but there are a few things that you can do:

Understand Where the Shame Comes From

The first step is to understand why you feel the way that you feel. This might not fix your debt shame, but it will help you to understand it more.

There is no single, overriding cause of debt shame. Some debtors feel shame because they see themselves as the breadwinner, the provider, and if they have debt it means they have failed. Others feel shame because they come from frugal backgrounds and have been wasteful or because their debt is the result of a drug, alcohol or gambling problem.

Whatever the reason, you need to find it, address it, and fix it. Get help for that gambling or drug addiction, get advice from that frugal family.

Admit Your Fault

Debt doesn’t mean that you’re a bad or useless person. It doesn’t mean that you don’t care about your family. It’s not a character flaw tied to your personality, it’s a behavioral issue tied to impulsivity and even mental health issues. It’s still your fault, but it’s easily fixed and doesn’t make you a bad person.

Understanding this can help you to get rid of that shame and deal with your stress and mental health issues.

Improve Your Financial Knowledge

Researchers have found a direct correlation between debt and financial knowledge; the more you have of the former, the less likely you are to be competent in the latter.

Fortunately, it has never been easier to educate yourself. Take a look at the many guides here on Pocket your Dollars, spanning everything from pay off strategies for credit card debt to money-making ideas, recommendations for loans and credit cards, and more.

Get Credit Counseling

Credit counseling exists for a reason and can help you in your time of need. They’re not mental health counselors, they can’t prescribe you medication and they can’t help with your insomnia and anxiety. However, they have worked with countless debtors, many of which have anxiety and depression, and they understand what it’s like to be in your shoes.

They can help you to assess and manage your debts before advising on the right course of action. A financial therapist can also provide assistance with any relationship issues, counseling you on who you should tell, how you should tell them, and what sort of reaction to expect.

The problem that many debtors have is that they think they know everything. They won’t speak to a counsellor because they’re convinced they know what the counsellor will say. But let’s be honest, if you’re struggling with debt, there’s a good chance you’re not a financial wizard and even if you are, it always helps to speak with an expert, voicing your concerns out loud and bouncing some ideas around.

Stop Spending

We spend when we’re depressed, get depressed because we’re in debt and are in debt because we spend too much. It’s a cycle that’s keeping your favorite retailer in profit and doing untold damage to your finances. To get out of debt, you need to accept that this cycle exists and that the only way to escape is to stop that spending immediately.

Anything that isn’t an absolute necessity can be left for another day, preferably one when you actually have money to spend. Limit your spending to clothes, food, rent, utility bills, medical bills, and everything else that allows you to continue living comfortably from day to day, but give the alcohol, cigarettes, vacations, and other luxuries a miss.

How to Take Control of Your Debt

The best way to avoid the shame and stress of debt is to get rid of it. Studies on debtors have found that at least 9 out of 10 believe they will be much happier if they didn’t have debt. These beliefs have been confirmed by individuals who successfully pay off debt, claiming = they are much happier than they ever were.

There are many ways you can pay off debt and we’ll look at a few of these options below, but generally speaking, you need to:

  • Assess your financial situation
  • Check your credit report and credit score
  • Get help from a credit counselor or financial therapist
  • If your debt-to-income ratio is low, budget better and pay off more with a debt payoff strategy
  • If your debt-to-income ratio is high, try debt relief
  • Create an emergency fund to prevent future issues

Best Ways to Get out of Debt

There is no debt shame if there is no debt. As discussed above, debt is not something you should be ashamed of, but it’s also not something you should cling onto. It can cause you a great deal of stress, placing strain on your relationships and generally making life very difficult for you.

So, while it’s important to face the truth of the situation and dispel those feelings of shame, it’s just as important to fight your debt and get your head above water. Here are a few debt relief options and debt payoff strategies that can help. For more information, including expensive guides and recommendations on each of these options, take a look at the relevant sections on Pocket Your Dollars.

Snowball and Avalanche Methods

The debt snowball and debt avalanche methods are two of the most popular debt payoff strategies, and ones that we have discussed at great length before (see debt snowball vs debt avalanche). They can make the process more systematic, which, in turn, may provide you with the support and the structure you need to get your debts in order. 

In both cases, you need to make a list of all your debts, covering things such as Balance, Monthly Payment, and Interest Rate. For debt snowball, sort the list by balance and go from the smallest to the largest. For debt avalanche, focus on the debts that have the highest interest rate and get those out of the way first. With both methods, you need to keep meeting your monthly payment obligations, before putting any extra money you have towards your chosen debt.

Debt avalanche provides the most practical benefits as it clears the problematic debts first, thus reducing the total interest. Debt snowball provides more of a psychological boost, giving you motivation as you steadily clear your debts.

Major Sacrifices

The biggest issue with any debt payoff strategy is that it isn’t easy to get the extra money you need to make those additional payments and clear your debts early. However, many debtors are trapped in a cycle of debt not because they can’t scrape the cents together no matter how hard they try, but because they struggle to budget properly and make the necessary sacrifices.

The average American debtor spends thousands of dollars every year on uneaten groceries, lottery tickets, and media subscriptions. They drop hundreds of dollars on luxuries they don’t really need and spend over $3,500 a year eating out. If debt is dragging you down then it’s imperative that you clear it, which means making some sacrifices and getting your priorities in check.

If you genuinely can’t spare a dime and don’t waste money on unnecessary expenses, then look into some of the options below.

Debt Settlement

Debt settlement is tailor-made for unsecured debt and works especially well for clearing credit card debt, as well as private students. Debt settlement companies often request that you stop meeting your monthly payment obligations, which puts the accounts into doubt and means your creditors are more likely to accept a settlement.

This settlement will clear the entirety of the debt for a fraction of the price, often around 50%. This means that a credit card debt of $10,000 would be cleared for $5,000, providing you with some big savings even after the settlement fees have been taken into account.

Debt Consolidation

A consolidation loan is a large loan that pays off all of your debt at a reduced interest rate and for a reduced monthly payment. The loan is often extended by several years, which means you pay more in the long-term, but the reduced monthly payments alleviate some of the burden and make the debt more manageable.

Debt Management

Debt management provides debtors with a debt repayment strategy, with all funds funneled through the debt management plan and then distributed to creditors. This service is often provided by credit counseling agencies and credit unions, who begin the process by negotiating with creditors and then assuming control of all debts.

These companies often ask that the debtors cancel all but one credit card, which can reduce the debtor’s credit score by impacting their credit utilization ratio.

Balance Transfer

A balance transfer credit card lets you move all your credit card balances onto a single card, one that offers a 0% APR for the first 6, 12 or 18 months, allowing you to pay down debt without interest, thus reducing compounded interest and clearing the debt quickly.

This method works with all credit card debt and you can typically move between 1 and 5 balances onto a new credit card, providing that card isn’t offered by the same company.

The Shame of Debt is a post from Pocket Your Dollars.

Source: pocketyourdollars.com

6 Cheap Super Bowl Snacks to Serve With the Big Game

Everyone knows that Super Bowl time is snack time.

But this year, given the ongoing coronavirus pandemic, you may be staying home to watch the game rather than heading to a big bash or going to a bar or restaurant and plunking down big bucks.

However you decide to watch the game, you can still enjoy some classic Super Bowl snacks.

6 Cheap Super Bowl Snacks to Enjoy With the Big Game

1. Chex Party Mix

Everyone loves this crunchy, salty snack. While there are thousands of different ways to make it, this time-tested recipe from The Spruce Eats is super easy and will appeal to the garlic lovers in your crowd.

Prep time: 15 minutes

Cook time: 60 minutes

You’ll need:

  • ½ cup butter
  • 2 tablespoons Worcestershire sauce
  • 1 teaspoon seasoned salt
  • 1 teaspoon garlic salt
  • ½ teaspoon onion powder
  • 3 cups corn Chex cereal
  • 2 cups wheat Chex cereal
  • 1 ½ cups mixed nuts
  • 1 cup small pretzels
  • 1 cup garlic-flavored bagel chips
  • 1 cup mini pretzel rods

Preheat the oven to 250 degrees. Melt the butter in a large pan and stir in Worcestershire sauce, seasoned salt, garlic salt and onion powder. Add everything else and toss thoroughly until well-coated. Bake for one hour, stirring the batch every 15 minutes. Let cool and store in an airtight container.

2. Honey Garlic Crockpot Meatballs

For a hearty main course, this incredibly easy meatball recipe from Family Fresh Meals will keep your crew happy. Serve them over noodles or rice for a main dish, or just let people enjoy them as an appetizer.

Prep time: 5 minutes

Cook time: 4 hours

You’ll need:

  • ¼ cup brown sugar
  • 1/3 cup honey
  • ½ cup ketchup
  • 2 tablespoons soy sauce
  • 3 minced garlic cloves
  • 1 (28 oz) bag fully cooked, frozen meatballs

Mix together the brown sugar, honey, ketchup, soy sauce and garlic. Next, place the meatballs in a three- or four-quart crockpot and cover in sauce, tossing to coat. Turn the crockpot on low for four hours and stir occasionally.

3. Baked Mozzarella Sticks

Enjoy the diner classic at home with The Spruce Eats recipe for baked mozzarella sticks.

Prep time: 15 minutes

Cook time: 5 minutes

You’ll need:

  • ½ cup brown rice flour
  • ¼ cup tapioca flour
  • 1/4 cup parmesan cheese, finely grated
  • 1/2 teaspoon garlic powder
  • 1/2 teaspoon salt
  • Freshly ground black pepper to taste
  • 2 large eggs
  • 6 sticks of low-moisture, part skim milk mozzarella string cheese (cut in half crosswise and frozen for 3-4 hours)
  • Grapeseed oil for frying
  • Marinara or other sauce for dipping

Add grapeseed oil to a skillet, and then mix the flours, parmesan, garlic powder, salt and black pepper in a shallow dish. Beat the eggs and add them to a separate dish. Coat the cheese, alternating between the dry mixture and the egg. Make sure to cover the entirety of the cheese pieces, including the ends.

Next, heat the oil in the pan to 360 degrees and then drop the frozen cheese into it. Turn them every 20 to 30 seconds until they are a golden brown color. Place the cheese on paper towels to absorb the excess oil, and then transfer them to a platter for serving.

4. Pigs in a Blanket

Prep time: 15 minutes

Cook time: 15 minutes

Go with the classic childhood favorite: buttery dough enveloping tasty mini-sausages. Pillsbury has a great recipe for pigs in a blanket. 

You’ll need:

  • 2 cans (8 ounces each) refrigerated crescent dinner rolls
  • 48 cocktail-sized smoked linked sausages

Preheat the oven to 375 degrees. Unroll all the dough and pull into 16 triangles. Cut each triangle into three narrow triangles. Roll a sausage link up in each triangle of dough. Place them on unlined baking sheets. Bake for 12 to 15 minutes until golden brown, rotating halfway through. Serve warm.

5. Crockpot Beer Cheese Dip

Prep time: 10 minutes

Cook time: 40 minutes

This snack from The Spruce Eats just may be the most indulgent one on this list. Have it with pretzels or tortilla chips — or even try something fancier like apples and vegetables.

  • 1/2 cup beer
  • 1/4 teaspoon Tabasco sauce
  • 1 pound processed cheese spread loaf, cut into 1-inch cubes
  • You’ll also need food to dip into it; The Spruce Eats suggests not only tortilla chips and hard and soft pretzels but also apples, crackers, bread cubes and assorted vegetables.

Combine the beer, Tabasco sauce and processed cheese spread in a slow cooker. Add more Tabasco sauce if you prefer a spicier treat. Cover and cook on high for 40 minutes. Once the cheese has melted, stir it to make it smooth. Keep it in the slow cooker on low and serve with the dippers.

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6. Restaurant-Style Buffalo Chicken Wings

It really is possible to enjoy restaurant-style buffalo chicken wings at home. This recipe from AllRecipes takes more time than others on the list, but that’s only because you need to chill the chicken before cooking it.

Prep time: 60-90 minutes (includes time to chill ingredients before cooking)

Cook time: 15 minutes

  • ½ cup all-purpose flour
  • ¼ teaspoon paprika
  • ¼ teaspoon cayenne pepper
  • ¼ teaspoon salt
  • 10 chicken wings
  • oil for deep frying
  • ¼ cup butter
  • ¼ cup hot sauce
  • 1 dash ground black pepper
  • 1 dash garlic powder

Mix flour, paprika, cayenne pepper and salt in a small bowl. Put the chicken wings in a nonporous glass dish or bowl and then sprinkle the flour mixture on top, evenly coating the wings. Cover the dish and refrigerate it for 60-90 minutes.

Heat the oil in a deep fryer to 375 degrees. Mix butter, hot sauce, pepper and garlic butter in a small saucepan and then put it over low heat. Stir until the butter melts and blend the mixture thoroughly. Then remove it from the heat.

Remove the wings from the refrigerator and fry them in the hot oil for 10 to 15 minutes. Remove them from the heat, put them in a serving bowl, add the hot sauce mixture and stir before serving.

Kristen Pope is a contributor to The Penny Hoarder. Editor Sushil Cheema contributed to this post.

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

Source: thepennyhoarder.com

10 Things to Know About Working in New York

10 Things to Know About Working in New York
Thinking about working in New York? There are some features of work life in the Big Apple that set it apart from the work culture in other cities. Is it true that if you can make it there you can make it anywhere? We’re not making any promises, but we can give you some tips about what working in New York is really like. 

Check out our 401(k) calculator. 

1. Salaries are high – but so is the cost of living.

For many fields, particularly those that require highly skilled workers, salaries in New York are higher than those in other cities. But before you get too excited about the fact that salaries in New York tend to be higher, keep in mind that the cost of living in New York is higher, too.

Luckily, there are plenty of financial experts around to help you figure out how to keep your finances in check. These are the top 10 New York financial advisor firms.

2. New Yorkers put in long hours.

New Yorkers tend to work longer hours than folks in other cities. In part, that’s because the workday itself is longer, but it’s also because New Yorkers tend to have long commutes. If you want to have plenty of free time to pursue side hustles or hobbies, working in New York might not be the best fit for you.

3. Commuting by public transit is the norm.

According to recent Census Bureau figures, 55.6% of New Yorkers take public transportation to work, 0.8% bike to work, 10.3% walk and 3.9% work at home. Hate crowds? Commuting by public transit could take some getting used to.

4. Office happy hour options are plentiful.

Working in New York means having a multitude of options for weekday lunches and office happy hours at your fingertips. Socializing with your coworkers after the end of a workday is easy with so many places to go and easy public transportation options to take you home at the end of the evening.

5. Being a working parent is expensive in New York.

10 Things to Know About Working in New York

New York has some of the highest childcare costs of any city in the nation. Being a working parent in New York is expensive – and it’s not easy, given the long hours New Yorkers put in. New York has a lower rate of working mothers than many other major U.S. cities, in part because the high price of childcare makes it hard for many New Yorkers to earn more than they would have to pay for childcare.

6. New York work culture takes some of its cues from Silicon Valley.

Some New York workplaces are taking their cues from the start-ups of Silicon Valley, implementing casual attire, flexible workdays and other features. In an effort to compete with companies in other cities, some New York companies are expanding the perks they offer their workers, so if you’re lucky enough to get a job in one of those companies, you’ll find that working in New York has its compensations.

7. Lots of New Yorkers have more than one job.

Whether they’re care workers who work double shifts or actors who tend bar on the side, many New Yorkers have more than one job. For some, having a second (or third) job is a matter of necessity, while for others it’s a way of advancing their career or expressing their artistic side. Plus, getting a second job (or a roommate) makes it easier to live the New York dream without going into debt.

8. There are professional support opportunities here.

Because it’s a huge, densely populated city, New York has professional support opportunities for those up and down the career ladder. You can get help finding a job or finishing your GED. You can also attend high-powered networking events and conferences. The important thing is to know what resources are out there and how to take advantage of them.

9. You can outsource a lot of tasks – if you have the money.

If it’s in your budget, you can outsource a lot of tasks that you don’t want to have to tackle during your non-working hours. That includes mailing packages, getting food, dropping off dry cleaning, completing home repairs and more. Of course, these services aren’t within reach of all New Yorkers, and many people like to do these basic “life admin” tasks themselves. But if you’re planning on diving into the workaholic lifestyle in New York and you think you’ll have some money to spare, there are lots of companies looking to make outsourcing chores easier for you.

10. It helps to know someone.

It helps to know someone when you’re looking for work in New York, if only to stand out from the pile of applications that so many New York jobs attract. That’s why it’s a good idea to build and maintain your network and put it to work for you when you’re looking for a new (or just better) job.

Bottom Line

10 Things to Know About Working in New York

Working in New York isn’t for everyone, but many find it to be an exciting challenge unlike what they would face elsewhere. For others, working in New York is more of a means to an end – living in New York. Wherever you stand, working in New York is made easier when you have a strong network and plenty of determination.

Tips for Maximizing Your Money

  • Come up with a budget – and stick to it. Instead of spending $5 a day on a latte, put that money in one of the best savings accounts where you can earn interest.
  • Work with a financial advisor. In addition to helping you craft a financial plan and identify your financial goals, a financial advisor can help you determine the right investments for your financial situation, time horizon and level of risk tolerance. A matching tool like SmartAsset’s SmartAdvisor can help you find a person to work with to meet your needs. First you’ll answer a series of questions about your situation and goals. Then the program will narrow down your options from thousands of advisors to three fiduciaries who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.

Photo credit: Â©iStock.com/Tempura, ©iStock.com/NYCstocker, ©iStock.com/Pavlina2510  

The post 10 Things to Know About Working in New York appeared first on SmartAsset Blog.

Source: smartasset.com

How an Employer 401(k) Match Works

Man at desk on tablet

Whether your retirement plans involve writing your memoir from a lovely little seaside cottage, a heated game of bocce against your (*ahem* sore loser) neighbor, or hitting up every farmers market in a 50-mile radius, a 401(k) is one savings strategy you can use to save money to get you there.

Simply put, a 401(k) is a mechanism for saving retirement funds by making pre-tax contributions through deductions from payroll. Some plans offer a 401(k) employer match, which can be the equivalent of getting “free money” from an employer.

A Quick Breakdown on 401(k) Plans

A 401(k) is an investment plan many employers offer their employees as a way to save for retirement. Employees can contribute either a percentage of or predetermined amount from each paycheck and, in some cases, the contributions can be matched by the employer up to a certain amount.

These deferred wages, also called “elective deferrals,” aren’t typically subject to federal income tax withholding, and are not listed as taxable income on the employee’s annual return.

If someone is self-employed, they can contribute to a one participant 401(k) plan plan with the same rules and requirements as an employer-sponsored 401(k) plan. Similarly, 457(b) plans can be used for public sector employees, and 403(b) plans for public schools and certain tax-exempt organizations.

Advantages of Participating in a 401(k)

A few advantages to participating in a 401(k) :

1. Investment gains and elective deferrals to 401(k) plans are not subject to federal income tax until they’re distributed, which is typically when:

•   The participant reaches the age of 59½
•   The participant becomes disabled, deceased, or otherwise has a severance from employment
•   The plan terminates and no subsequent plan is established by the employer
•   The participant incurs a financial hardship

2. Elective deferrals are 100% vested. The participant owns 100% of the money in their account, and the employer cannot take it back or forfeit it for any reason.

3. Participants choose how to invest their 401(k). The plans are mainly self-directed, meaning participants decide how they’d like to invest the money in their account. This could mean mutual funds or exchange-traded funds (ETFs) which invests in a wide array of sectors and companies, but typically doesn’t include investing in individual companies and stocks.

Investment tactics might vary from person to person, but by understanding their goals, investors can decide whether their portfolio will have time to withstand market ups and downs with some high-risk, high-reward investments, or if they should shift to a more conservative allocation as they come closer to retirement.

What About 401(k) Vesting Schedules?

“Vesting ” means “ownership” in a retirement plan. The employee will vest, or own, some percent of their account balance. In the case of a 401(k), being 100% vested means they’ve met their employer’s vesting schedule requirements to ensure complete ownership of their funds.

Vesting schedules, determined by 401(k) plan documents, can lay out certain employer vesting restrictions that range from immediate vesting to 100% vesting after three years to a schedule that increases the vested percentage based on years of service. Either way, all employees must be 100% vested if a plan is terminated by the employer or upon reaching the plan’s standard retirement age.

How Does a 401(k) Match Work?

A 401(k) match is an employee benefit that allows an employer to contribute a certain amount to their employee’s 401(k) plan. The match can be based on a percentage of the employee’s contribution, up to a certain portion of their total salary or a set dollar amount, depending on the terms of the plan.

Not all employers offer this benefit, and some have prerequisites for participating in the match, such as a minimum required contribution or a cap up to a certain amount.

Meeting with an HR representative or a benefits administrator is a one way to get a better idea of what’s possible. Learning the maximum percent of salary the company will contribute is a start, then the employee can set or increase their contribution accordingly to maximize the employer match benefit.

Benefits of a 401(k) Employer Match

According to a report from Fidelity Investments , the average employer 401(k) match reached a record high of 4.7% in 2019 and “boosted the average total savings rate to an all-time high of 13.5%.”

Many employees are taking advantage of this benefit. Some reasons they could benefit:

It’s Basically “Free Money”

An employer match is one part of the overall compensation package and another way to maximize the amount of money an employer pays their employees. Those employees could be turning their backs on free money by not contributing to an employer-matched 401(k) plan.

Reducing Taxable Income

According to FINRA , “with pre-tax contributions, every dollar you save will reduce your current taxable income by an equal amount, which means you will owe less in income taxes for the year. But your take-home pay will go down by less than a dollar.”

If a participant contributed $1,500 a year to a 401(k), they’d only owe taxes on their current salary minus that amount, which could save some serious money as that salary grows.

The Most Common Employer Match Formulas

Not all employer matches are created equal.

According to a recent report from Vanguard , “How America Saves,” among the 150 distinct match formulas administered through their employer-matched 401(k) plans in 2018:

•  70% of plans used a single-tier match formula, with the most commonly cited being $0.50 on the dollar on the first 6% of pay.
•  21% of plans used multi-tier match formulas, e.g., dollar-on-dollar on the first 3% of pay and $0.50 on the dollar on the next 2% of pay.

A Sample Employer Match 401(k) Scenario

For the sake of breaking a few things down, here’s a retirement saving scenario that can illuminate how 401(k) matching works in real life:

Let’s say a person is 30 years old, with a salary of $50,000, contributing 3% of their salary (or $1,500) to a 401(k). Let’s also say they keep making $50,000 and contributing 3% every year until they’re 65. They will have put $52,500 into their 401(k) in those 35 years.

Now let’s say they opt into an employer match with a dollar-for-dollar up to 3% formula. Putting aside the likelihood of an increase in the value of the investments, they’ll have saved $105,000— with $52,500 in free contributions from their employer.

That’s a no-cost way to increase retirement savings by 100%.

How Much Should a Participant Contribute?

The average 401(k) employee contribution amount, according to Fidelity , reached a record level of $2,370 in 2019. Still, there’s no across-the-board amount that will work for everyone.

When deciding how much to contribute to a 401(k) plan, many factors might be considered to take advantage of a unique savings approach:

•   If a company offers a 401(k) employer match, the participant might consider contributing enough to meet whatever the minimum match requirements are.
•   If a participant is closer to retirement age, they’ll probably have a pretty good idea of what they already have saved and what they need to reach their retirement goals. An increase in contributions can make a difference, and maxing out their 401(k) might be a solid strategy.

A retirement calculator can also be helpful in determining what the right contribution amount is for a specific financial situation.

Are There 401(k) Contribution Limits?

In addition to the uncertainty that can come with choosing how much to contribute to a 401(k), there’s the added pressure of potential penalties for going over the maximum 401(k) contribution limit.

Three common limits to 401(k) contributions :

1. Elective deferral limits: Contribution amounts chosen by an employee and contributed to a 401(k) plan by the employer. In 2020, participants can contribute up to $19,500.

2. Catch-up contribution limits: After the age of 50, participants can contribute more to their 401(k) with catch-up contributions. In 2020, participants can make up to $6,500 in catch-up contributions.

3. Employer contribution limits: An employer can also make contributions and matches to a 401(k). The combined limit (not including catch-up contributions) on employer and employee contributions in 2020 is $57,000.

If participants think their total deferrals will exceed the limit for that particular year, the IRS recommends notifying the plan to request the difference (an “excess deferral ”) “be paid out of any of the plans that permit these distributions. The plan must then pay the employee that amount by April 15 of the following year (or an earlier date specified in the plan).”

Getting Started With Investing

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Opening a SoFi Invest® account lets you get started with as little as $1 and comes with complimentary access to financial advisors who are held to the highest fiduciary standards, meaning they’re required to act on your best interests. Try an exploratory conversation at no cost.

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